David Darmanin
In spite of more than a 27% decrease in oil prices since the government’s announcement of a fuel surcharge increase last June, government officials confirmed that a discount on electricity bills is not on the cards, or certainly not until the end of year.
After the price of crude oil reached an all time high at $146 per barrel last June, a subsequent unexpected increase in US oil inventories in July eased up market prices, now down to €106.23.
But the hedging system adopted by Enemalta, which involves pre-purchasing of oil at a fixed price for a future period as a protection from further hikes in energy costs, worked counter-productively this time.
In a story published by sister newspaper Business Today two weeks ago, a spokesperson for the Ministry of Infrastructure, responsible for Enemalta, said that the June revision in surcharge rates was based on a hedged rate of oil, purchased at an average of €121.95 per barrel until the end of year.
“One may also note that Enemalta is practically 100% hedged till year-end, up to 50% hedged for 2009, including a number of hedges that are still below the current market levels,” he said.
Using the current hedging system, when rates were compared to the cost of electricity net of surcharge in June, the calculation came up to a surcharge rate of 115%, whereas if oil would have been purchased at spot prices of the time, it would have amounted to a staggering 160%.
“Conscious of the fact that a 115% surcharge would place undue pressure on consumers, the government had decided on a 95% surcharge until September, and to take on the 20% difference,” the Ministry said. “A further reduction in the 95% based on current prices is not realistic.”
ddarmanin@mediatoday.com.mt
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